What are hard credit pulls?

A credit inquiry, request, or “pull,” occurs when a third party orders a credit report or rating on an individual consumer or company. The hard pull is the standard method used by many lenders, creditors, loan brokers and institutions to request and receive credit history data for individuals

Comparing hard pulls and soft pulls

In the consumer loan industry, credit inquiries are sometimes labeled as either soft pulls or hard pulls. Although the same lender may use both types of pulls, a soft credit inquiry and hard credit inquiry have important differences that directly affect the consumers whose credit data is being reviewed:

Data provided. A hard credit pull or inquiry provides more credit data than does a soft pull. In fact, some credit reports may provide the lender, creditor or ordering party with hundreds of data points. In contrast, most soft credit pulls provide the lender or creditor with almost no data.

Notice to consumers. Lenders, creditors and employers can obtain a soft credit inquiry on an individual – without that individual ever realizing it. A hard credit inquiry will be recorded on the individual’s credit report.

Effect on credit scores. Credit scoring algorithms, such as the FICO score, generates credit scores based on data available in a person’s credit record. Because hard pulls by lenders and creditors are recorded as “credit inquiries” they will affect credit scores, although the effects tend to be short-lived. Soft pulls, on the other hand, usually have no effect on credit scores.

Decline notice. If a loan applicant is denied credit because of information provided by a hard credit pull, the lender must provide the applicant with a decline or denial letter explaining the reasons for the denial. Such denial letters are not required for soft credit pulls. On the other hand, many soft pulls require the lender to make a firm offer to eligible applicants – and stand by those offers.

How does a hard credit pull work?

Hard pull inquiries normally take place whenever a company or entity obtains credit data from a credit reporting agency or bureau about an individual. Per the Fair Credit Reporting Act, the business or third-party obtaining a credit report must have a legitimate reason for receiving and viewing a person’s credit report.

Most hard credit inquiries today are ordered and received electronically. Lenders, landlords, employers and even government entities can order credit reports from a credit bureau online. The credit bureau then provides the party ordering the hard pull with a credit report on the affected individual.

When a hard inquiry is processed, the credit reporting agency will record an inquiry in the individual’s credit history. Individuals who use a credit alert service will often receive immediate notice from that service whenever any entity or third party runs a hard credit inquiry.

The result of a hard credit pull is the borrower’s credit history with the credit bureau providing the report.

How a hard credit inquiry affects credit scores

Because hard credit inquiries become part of a person’s credit record, credit scoring systems will normally factor hard inquiries when calculating credit scores. Here’s how most hard inquiries will affect consumer credit scores:

Mild effect. Isolated and single credit inquiries will have little effect on a person’s credit score. In addition, because credit inquiries are not considered as serious as delinquencies, late payments, defaults and judgments, isolated credit inquiries will typically not affect credit scores by much.

Negative effect. A new or recent credit inquiry can lower a person’s credit score. Multiple hard inquiries in a short period can potentially lower scores even more. The reason that a hard pull lowers credit scores is that they signal the possible addition of new debts to a person’s credit record. And although multiple credit inquiries may mean that someone is shopping around for just the right loan or credit card, it may also mean that the borrower will be adding multiple debts.

Short term. Fortunately, the negative effects of hard credit pulls are short term. Much, if not all, of the effects of a credit inquiry will usually be gone within three months. By that time, if a credit inquiry results in a new debt, that new debt will be recorded on the credit report and will be included in the credit score anyway.

What information is needed for a hard credit inquiry?

Lenders, creditors and other credit report users need very little information to conduct a hard pull on an individual’s credit history. In fact, contrary to what many believe, a social security number isn’t even required to run a hard pull. The ordering party and credit bureau just needs the name and enough identifying information to accurately match a credit report to the subject person.

For example, it’s sometimes enough to just have the person’s name along with either the current home address or date of birth to run a hard credit pull. If that information is enough to properly identify one person’s credit record, the credit bureau can provide a credit report – without a social security number.

Having said that most lenders and creditors often collect the following information so as to improve their chances of obtaining a properly matched credit report for a potential borrower:

Full name of the borrower

Current home address of the borrower

Social security number

Borrower’s date of birth

Authorization from the borrower to run a credit report

That last requirement is perhaps the most important, from a legal and liability perspective, for most lenders and creditors. They must have the borrower’s authorization in order to run a hard pull, as federal laws restrict who can access a person’s credit reporting data.

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